Process: 632/2016-T

Date: May 14, 2017

Tax Type: Selo

Source: Original CAAD Decision

Summary

CAAD Process 632/2016-T addresses two critical issues regarding Stamp Tax under Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS). The claimant challenged the second installment of Stamp Tax for 2015, assessed on a vertical ownership property in Lisbon valued at €1,147,130.00, comprising seven independent housing units. The Tax Authority raised a preliminary exception of non-challengeability, arguing that individual installments cannot be autonomously contested as they constitute mere payment divisions of a single annual assessment act. On the merits, the dispute centered on whether the taxable base for vertical ownership properties should be calculated as the aggregate value of all independent units or each unit separately. The claimant argued that since no individual unit exceeded the €1,000,000 threshold, the tax should not apply. The Tax Authority contended that vertical ownership properties must be valued as a whole, with the taxable base corresponding to the sum of all independent units. This decision clarifies the procedural principle of inimpugnabilidade autónoma de prestações (non-autonomous challengeability of installments) in Portuguese tax law, establishing whether taxpayers can file separate arbitration proceedings for each installment or must challenge the entire annual assessment. The ruling also provides guidance on applying Verba 28.1 TGIS to properties held in vertical ownership versus horizontal ownership, determining whether independent units retain tax autonomy for Stamp Tax purposes. The arbitral tribunal analyzed the legal nature of tax installments under the Tax Procedure Code and examined whether payment notifications constitute independent challengeable acts. This precedent impacts property owners subject to annual Stamp Tax on high-value residential real estate and establishes important procedural boundaries for tax arbitration under the RJAT framework.

Full Decision

ARBITRAL DECISION

I. REPORT

A…, NIF…, resident at Rua…, … –..., in Lisbon, (hereinafter referred to simply as the Claimant), submitted, on 21-10-2016, an application for the constitution of a single-member arbitral tribunal, pursuant to articles 2º and 10º of Decree-Law No. 10/2011, of 20 January (Legal Regime for Arbitration in Tax Matters, hereinafter referred to simply as LRATM), in conjunction with paragraph a) of article 99º of the Code of Tax Procedure, in which the Tax and Customs Authority is named as Respondent (hereinafter referred to simply as the Respondent).

The Claimant seeks a declaration of illegality of the tax assessment acts for the second instalment of Stamp Tax under item 28.1 of the General Stamp Tax Table (hereinafter, GSTT), for the year 2015, concerning the urban property located at Rua…, No.…, in Lisbon, registered in the urban property registry of the parish of …, municipality of Lisbon, under article….

The application for constitution of the arbitral tribunal was accepted by His Excellency the President of CAAD on 24-10-2016 and notified to the Tax and Customs Authority on that same date.

Pursuant to the provisions of paragraph a) of article 6º, paragraph 2, and paragraph b) of article 11º, paragraph 1, of the LRATM, the Ethics Council appointed the undersigned as arbitrator of the single-member arbitral tribunal, who communicated acceptance of the appointment within the applicable period.

On 28-12-2016 the parties were duly notified of this appointment, having not expressed any intention to refuse the appointment of the arbitrator, in accordance with the combined provisions of article 11º, paragraph 1, paragraphs a) and b), of the LRATM and articles 6º and 7º of the Code of Ethics.

In accordance with the provisions of paragraph c) of article 11º, paragraph 1, of the LRATM, the single-member arbitral tribunal was constituted on 20-01-2017.

Notified to submit its response, the Respondent raised the exception of non-challengeability of the subject matter of the arbitral proceedings and concluded that the Claimant's application was wholly unfounded.

To exercise the right to be heard, the Claimant was notified to comment on the exception raised by the Respondent and to confirm the subject matter and economic value of the application, having submitted a written statement accordingly.

By order of 21-03-2017, the hearing provided for in article 18º of the LRATM was dispensed with, and the parties were granted a period to submit successive written submissions, which neither party proceeded to do.

II. SUBJECT MATTER OF THE APPLICATION

The Claimant seeks a declaration of illegality of the assessment of the second instalment of Stamp Tax under item 28.1 of the GSTT for the year 2015, in the total amount of €3,823.75, concerning the property located at Rua…, No.…, in Lisbon, held under vertical ownership. As grounds, the Claimant alleges factual and legal error in that the Respondent took as the basis for the tax's incidence the total aggregate value of the parts for independent use allocated to housing that make up the property identified, and not the individual value of each one of those same parts. Where a property held in vertical ownership is composed of units capable of independent use, the property tax value relevant for purposes of assessing Stamp Tax shall be that of each one individually considered and not their sum, similar to what occurs with IMI. Since none of the areas for independent use has a tax property value equal to or exceeding €1,000,000.00, one of the elements of incidence is not satisfied and, therefore, the assessments made are illegal and should consequently be annulled.

In response, the Respondent invokes the exception of non-challengeability of the instalments of the tax assessment acts under item 28.1 of the GSTT. Indeed, the Respondent contends that the tax assessment act for item 28 of Stamp Tax is single and the fact that the tax may be paid in instalments does not mean that multiple assessments have occurred. The nature of the instalments of a tax assessment is that of division of the overall assessment, made annually, and each instalment cannot per se be challenged independently, as the subject matter of judicial and arbitral proceedings is the tax assessment act. The Respondent therefore concludes that it is impossible to examine the legality of the tax assessment acts for the second instalment of Stamp Tax under item 28.1 of the GSTT, which is the subject matter of the arbitral proceedings, with the consequent absolution of the Respondent from the action.

Notwithstanding, and as regards the substantive issue, the Respondent argues, briefly, that in properties not subject to horizontal ownership, units capable of independent use have no autonomy whatsoever; their individualization for purposes of property registry registration and valuation does not affect their respective legal and tax nature, the law determining that the value of the property shall necessarily correspond to the sum of the value of the various independent units. Units of independent use cannot be considered as "properties" in accordance with the legal definition and therefore cannot be relevant for purposes of the incidence of item 28.1 of the GSTT. For purposes of this provision, account must therefore be taken of the property tax value of the property held in vertical ownership which shall correspond, pursuant to the law, to the sum of the values of each unit capable of independent use. The Respondent therefore concludes that the contested assessments are lawful and should therefore be maintained.

In its comments on the exception raised, the Claimant reiterated that the subject matter of the present proceedings are the assessments of the second instalment of Stamp Tax under item 28.1 of the GSTT. In its view, it is possible and legally admissible to challenge "independently the assessment of each one of the stamp tax instalments, concerning the same property and concerning the same stamp tax, in three separate arbitral proceedings" and therefore the exception raised does not succeed. This challengeability derives from the fact that, in the Claimant's view, the notification for payment of the second Stamp Tax instalment constitutes a tax act. Indeed, "When notified to pay each one of the instalments (1st, 2nd and 3rd instalments), the Claimant is notified of the assessment of isolated tax acts with independent periods for challenge". The Claimant therefore concludes that the exception raised is unfounded.

III. PRELIMINARY RULING

The Arbitral Tribunal was properly constituted and is competent.

The parties have legal personality and capacity and are legitimately before the court (articles 4º and 10º, paragraph 2, of the same statute and article 1º of Ordinance No. 112-A/2011, of 22 March).

The proceedings are not affected by any procedural defects.

III. MATTERS OF FACT

A. Facts Proven

The following facts are deemed proven:

1. The Claimant is the owner of the urban property located at …, No.…, in Lisbon, registered in the urban property registry of the parish of …, municipality of Lisbon, under article….

2. As of the date of the assessments, the property identified had a tax property value of €1,147,130.00.

3. The property identified is composed of 7 units capable of independent use allocated to housing.

4. None of the units capable of independent use has a tax property value exceeding €1,000,000.

5. The Claimant was notified to proceed with payment, during the month of July 2016, of the second instalment of Stamp Tax under item 28.1 of the GSTT for the year 2015, concerning the property identified, in the total amount of €3,823.75.

6. On 21-10-2016, the Claimant filed the present application for arbitral proceedings.

B. Facts Not Proven

No other facts with relevance to the arbitral decision were proven.

C. Factual Findings

The factual findings deemed proven are based on the documentary evidence presented and not contested.

IV. MATTERS OF LAW

The first issue to be decided in the present proceedings concerns the alleged exception of non-challengeability of the tax acts which are the subject matter of the present application for arbitral proceedings. It is thus necessary, first of all, to determine and delimit concretely the subject matter of the application for arbitral proceedings.

From the initial petition submitted by the Claimant, it follows that the present arbitral proceedings concern the tax assessment acts for the second instalment of Stamp Tax under item 28.1 of the GSTT for the year 2015, and accordingly the economic value of the application was declared to be the total value of the corresponding collection notices (€3,823.75).

After the request for clarification presented by the Tribunal asking the Claimant to clarify the subject matter of the application for arbitral proceedings and confirm the economic value of the application, the Claimant reiterated that its application aimed at the tax assessment acts for the second instalment of Stamp Tax under item 28.1 of the GSTT. To justify the legitimacy and admissibility of the application – and thereby prevent the exception raised by the Respondent from being upheld – the Claimant argued that the taxpayer may "independently challenge the assessment of each one of the stamp tax instalments, concerning the same property and concerning the same stamp tax, in three separate arbitral proceedings". Indeed, "When notified to pay each one of the instalments (1st, 2nd and 3rd instalments), the Claimant is notified of the assessment of isolated tax acts with independent periods for challenge". This position and understanding of the Claimant leaves no room for interpretative doubt, and it is very clear to this tribunal that what the Claimant seeks is the annulment of the assessment of the second instalment of Stamp Tax.

Having thus determined the subject matter of the application for arbitral proceedings, this Tribunal finds that the Respondent is correct regarding the exception raised.

Indeed, contrary to what the Claimant contends, Stamp Tax under item 28.1 of the GSTT is assessed annually, in a single act, with its payment being divisible into two or three instalments. This is confirmed by the provisions of paragraph 7 of article 23º of the Stamp Tax Code, read in conjunction with article 120º of the Municipal Property Tax Code, by reference of paragraph 2 of article 67º of the Stamp Tax Code.

The collection notices for the second instalment of the tax sent to the Claimant for payment during the month of July do not constitute autonomous tax assessment acts, challengeable separately.

As the Respondent correctly states, the tax assessment act for item 28.1 of the GSTT is single, and the fact that it may be paid in various instalments does not imply that multiple assessments have occurred. Each instalment represents merely a part of the single overall assessment made annually and in a single moment, and each instalment cannot be challenged independently since the subject matter of judicial challenge or tax arbitral proceedings is the tax assessment act.

This same conclusion was already recognized by the Administrative Court of the South (Tribunal Central Administrativo Sul), in the judgment of 27-10-2016, handed down in case No. 09711/2016 (available at www.dgsi.pt), in which it was concluded that "In the specific case, it should be said from the outset that the payment instalments (two or three, depending on the total annual tax amount to be paid) of a Stamp Tax assessment made under article 28 of the GSTT are not separately subject to review as they originate from a single annual obligation (see article 23, paragraph 7, of the Stamp Tax Code), it being that the division of an annual assessment into instalments is merely a revenue collection technique (see article 120, paragraph 1, of the Municipal Property Tax Code, 'ex vi' of article 67, paragraph 2, of the Stamp Tax Code; A. Braz Teixeira, Principles of Tax Law, Volume I, 3rd edition, Almedina, 1995, page 243 et seq.)".

Accordingly, since the subject matter of the present proceedings are acts that do not correspond to tax assessment acts, susceptible as such of judicial challenge, pursuant to paragraph a) of article 95º, paragraph 2, of the LGT and paragraph a) of article 97º, paragraph 1, of the Code of Tax Procedure, the preliminary exception raised by the Respondent is well-founded and the Respondent shall accordingly be absolved from the action, pursuant to article 89º, paragraph 2, paragraph i), of the Code of Administrative Procedure, applicable by reference of paragraph c) of article 29º of the LRATM, rendering the examination of the merits moot.

V. DECISION

In accordance with the foregoing, this Arbitral Tribunal decides to uphold the preliminary exception of non-challengeability of the acts which are the subject matter of the application for arbitral proceedings and accordingly absolves the Respondent from the action, pursuant to article 89º, paragraph 2, paragraph i), of the Code of Administrative Procedure, applicable by reference of paragraph c) of article 29º of the LRATM.

Value of the Case: In accordance with the provisions of article 306º, paragraph 2, of the Civil Procedure Code and article 97º-A, paragraph 1, paragraph a), of the Code of Tax Procedure and article 3º, paragraph 2, of the Regulation of Costs in Tax Arbitration Proceedings, the value of the case is set at €3,823.75 corresponding to the total value of the second instalment of Stamp Tax assessed.

Costs: Pursuant to paragraph 4 of article 22º of the LRATM, the amount of costs is fixed at €612.00, in accordance with Table I attached to the Regulation of Costs in Tax Arbitration Proceedings, to be borne by the Claimant.

Let this arbitral decision be registered and notified to the parties.

Lisbon, 14-05-2017

The Single Arbitrator

(Maria Forte Vaz)

Frequently Asked Questions

Automatically Created

What is the Stamp Tax under Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS) and when does it apply to residential properties?
Stamp Tax under Verba 28.1 of the Portuguese General Stamp Tax Table (TGIS) is an annual tax on ownership rights over residential urban properties located in Portuguese territory with a taxable property value (valor patrimonial tributário) equal to or exceeding €1,000,000. The tax applies at progressive rates and is assessed annually on properties that meet this threshold. For the 2015 tax year in this case, the tax was payable in three installments during specific months. The tax incidence requires two cumulative elements: (1) ownership of urban property allocated to residential use, and (2) a taxable property value of at least €1,000,000. The determination of this value becomes particularly complex in vertical ownership properties composed of multiple independent units, raising questions about whether each unit should be considered separately or the property valued as an aggregate whole for purposes of meeting the €1,000,000 threshold.
Can a taxpayer autonomously challenge individual installments of Stamp Tax (Imposto do Selo) through tax arbitration in Portugal?
The central procedural issue in Process 632/2016-T concerns whether individual installments of Stamp Tax can be autonomously challenged through separate tax arbitration proceedings. The Tax Authority argued that the tax assessment act under Verba 28.1 TGIS is singular and indivisible - the annual assessment constitutes one legal act, while installments merely represent payment facilities dividing the overall tax liability into manageable portions. According to this view, each installment cannot be challenged independently as the proper subject matter of judicial or arbitral proceedings is the assessment act itself, not its payment divisions. The claimant countered that each installment notification constitutes an independent tax act with separate challenge periods, allowing autonomous contestation of individual installments in separate arbitral proceedings. This dispute involves interpreting the legal nature of installments under Portuguese tax procedure law and determining whether payment notifications for installments constitute challengeable tax acts or merely execution steps of a single prior assessment.
How does the CAAD arbitral tribunal determine the taxable base for vertical ownership properties under Verba 28.1 TGIS?
The determination of the taxable base for vertical ownership properties under Verba 28.1 TGIS presented a substantive legal challenge. The claimant owned a property in vertical ownership comprising seven independent housing units, each with its own property registry entry and individual taxable property value. The total aggregate value was €1,147,130.00, exceeding the €1,000,000 threshold, but no individual unit reached this threshold. The claimant argued that the relevant taxable base should be each independent unit's individual value, analogous to the approach used for Municipal Property Tax (IMI), where each unit is taxed separately. Since no individual unit met the €1,000,000 threshold, the tax should not apply. The Tax Authority argued that vertical ownership properties lacking formal horizontal ownership status must be valued as a single property unit, with the taxable base corresponding to the sum of all independent units. The Authority contended that independent units in vertical ownership lack legal autonomy and cannot be considered separate 'properties' for Stamp Tax purposes, requiring assessment based on the aggregate property value.
What is the legal principle of inimpugnabilidade autónoma de prestações and how does it affect Stamp Tax disputes?
Inimpugnabilidade autónoma de prestações is the Portuguese legal principle of non-autonomous challengeability of installments. This principle establishes that when a tax liability is divided into multiple installments for payment convenience, each installment cannot be independently challenged as a separate legal act. Instead, the underlying assessment act itself constitutes the proper subject matter for judicial or administrative challenge. Under this principle, installments represent mere payment divisions of a single tax obligation rather than distinct assessable acts. The Tax Authority invoked this principle arguing that Stamp Tax under Verba 28.1 TGIS involves one annual assessment act, with payment divided into three installments. Consequently, challenging only the second installment would be procedurally improper - the claimant should have challenged the entire annual assessment. This principle prevents fragmentation of tax disputes and ensures that challenges address the assessment's legality as a whole rather than attacking individual payment components. The principle affects access to tax arbitration by potentially limiting the subject matter that can be brought before CAAD tribunals and requiring taxpayers to frame their challenges comprehensively against the complete assessment rather than selective installments.
What procedural steps are required to file a tax arbitration claim (pronúncia arbitral) against Stamp Tax assessments under the RJAT?
To file a tax arbitration claim against Stamp Tax assessments under the Portuguese Legal Regime for Tax Arbitration (RJAT - Decree-Law 10/2011), taxpayers must follow specific procedural steps. First, submit an application for constitution of an arbitral tribunal to the Centro de Arbitragem Administrativa (CAAD), identifying the Tax and Customs Authority as respondent and specifying the contested tax acts. The application must comply with Article 10 RJAT requirements, including identification of parties, description of facts, legal grounds, evidence, and requested relief. The CAAD President reviews and accepts the application if procedurally compliant. The Ethics Council then appoints an arbitrator (for single-member tribunals per Article 2 RJAT) or a panel of three arbitrators. Parties receive notification of arbitrator appointments and may refuse appointments within the statutory period under Articles 6-7 of the Code of Ethics. Once the arbitrator(s) accept and the refusal period expires, the tribunal is formally constituted per Article 11 RJAT (typically within three months of application). The respondent Tax Authority submits its response, potentially raising preliminary exceptions. Parties may submit successive written pleadings, and the tribunal may hold hearings under Article 18 RJAT or dispense with them. The timeline from application to tribunal constitution in this case was approximately three months (October 2016 to January 2017).